The potential for growth in Africa by bringing consumers into the formal alcohol market is substantial, beer and soft drinks company SABMiller has advised shareholders in a statement. By developing new affordable brands, such as Chibuku Super and Impala, which was the world’s first commercial cassava beer in Mozambique, and maintaining moderate pricing regimes on its beer brands, SABMiller expected to win a share from the informal alcohol market and achieve significant long-term volume and net producer revenue (NPR) growth in Africa.

At an investor seminar in London, SABMiller Africa MD Mark Bowman underlined his confidence in the strong long-term growth potential for beer on the continent.

Africans drank 9 ℓ of beer a head each year, compared with the global average of 45 ℓ, with 90% of alcohol consumed in Africa being non-beer and greater than 80% being informal alcohol. However, African alcohol consumption, including formal and informal alcohol, was in line with the global average at 6.2 ℓ of pure alcohol a person each year.

“The informal market continues to dwarf formal alcohol in Africa,” Bowman noted, adding that homemade or illicit alcohol posed a potential health risk to consumers, but was considerably cheaper. Therefore, SABMiller’s challenge was to ensure that price-sensitive consumers were provided with affordable, high-quality alternatives.

This would involve meeting consumers’ desires to be seen with premium products and socialising in the right places, developing Castle Lite as Africa’s leading regional premium brand and being innovative to target new consumer occasions by bringing women into the beer category through the development of flavoured long alcoholic drinks.

“So, as Africa develops and the level of disposable income increases, we expect the rate of beer consumption to grow significantly. Additionally, we anticipate strong gross domestic product (GDP) growth in Africa,” Bowman advised.

SABMiller said Africa’s growth fundamentals were compelling, expecting 2015 to deliver a 2.6% increase in population growth, a 5.4% increase in GDP and/or capita growth and a 4.3% increase in urbanisation.

Further, the company wanted to shape its footprint to contribute to growth through a strategic alliance between SABMiller and Castle, which provided a collective presence in 38 markets across Africa. It further highlighted a proposed transaction regarding Coca-Cola Beverages Africa to create the tenth-largest bottler globally, with 40% of Coca-Cola beverage volumes in Africa and pro forma revenues of $2.9-billion. The expansion into fast-growing mainstream local spirits in five markets and the integration of SABMiller Africa and SAB to leverage scale were also mentioned.

SABMiller had lowered costs as a percentage of NPR from 78% in financial year 2010 to 72% in financial year 2014. Costs had also reduced on efficiencies achieved, owing to a regional procurement centre and synergies achieved through the integration of SABMiller Africa and SAB.

Over the medium-term, SABMiller Africa intended to grow NPR by 10% on an organic, constant currency basis and obtain volume growth in the midsingle digits and NPR for every hectolitre in the midsingle digits on an organic, constant currency basis. Earnings before interest, taxes and appreciation margin growth was expected to be between 10 basis points and 40 basis points.